Thursday, November 10, 2011

The Economic Butterfly Effect

"The Market" is a complicated system. The system's rules are often regarded as natural, even if they're arbitrary. People have occasionally proven themselves bad at engineering complicated systems. (Think Jurassic Park.) People have lately proven themselves bad at pulling magical free money out of the market. We've seen a lot of unintended and bad consequences from economic policies and financial innovation.

I don't see why it's obviously stupid to try and cut down on the population of dengue-carrying mosquitoes, but not obviously stupid to use the system of farm subsidies we do. In either situation, there will be unintended consequences, but Paul Wolfowitz wasn't just suffering aphasia when he made up the term, "unknown unknowns."

I don't think either of these things is obviously stupid. You see a lot of caution with regard to economic experimentation in the implementation of the PPACA. On the one hand, it seems like the long phase-in of health care is a very bad electoral strategy. On the other, if something horrible happens with a provision or two, we're not so far into it that we can't think of something else to try.

Oddly, I seem to be on the same page as Sen. James DeMint (R-SC) (Via Ezra Klein) with this issue of letting the system do what it does (when we can afford it). As a statement against weird subsidies, I think that post is over-the-top but basically correct. I just took out all of the unnecessary Obama-bashing, and added an analogy instead of a ridiculous shout-out to the artificial Christmas tree industry.